Adidas announced its financial results for the third quarter of 2022 on November 9. The firm’s performance in Greater China, its former growth engine, continued to exhibit poor results, with combined revenue of only 2.66 billion euros in the first three quarters, down 25.3% year-on-year. This is the sixth consecutive quarterly decline recorded by Adidas in Greater China.
The report shows that Adidas’s net sales in the third quarter totaled 6.408 billion euros, a year-on-year increase of 11.4%. Its operating profit was 564 million euros, down 16.0% year-on-year, while gross profit margin decreased by 1.0 percentage points to 49.1%.
The European market is still the firm’s main source of revenue, with revenue of 6.47 billion euros in the first three quarters, up 9.3% year-on-year, followed by the North American market, which handed over 4.86 billion euros in revenue, a year-on-year increase of 27.8%.
On August 10, Adidas CEO Kasper Rorsted admitted in an exclusive interview with Handelsblatt that the firm had “made mistakes” in the Chinese market, adding that “we don’t know enough about consumers, so we leave room for Chinese competitors who do better.”
On August 22, Adidas stated in an internal report that it had reached an agreement with Kasper Rorsted, who will leave next year. At that time, Kasper Rorsted’s contract with Adidas was still valid for three years.
At present, Adidas has more than 10,000 employees and more than 12,000 stores in China, including seven brand centers in Beijing, Shanghai, Chongqing, Shenzhen and Taipei, as well as a series of unique specialized stores.
The Chinese market, which has been deeply cultivated for 25 years, has been one of the most important revenue sources of Adidas before the outbreak of COVID-19. In 2019, the Chinese market contributed over 20% of the firm’s revenue. However, since 2021, Adidas’s sales performance in the country has been declining.
Regarding the matter, Xiao Jiale, the managing director of Adidas Greater China, confirmed that China is one of the firm’s three most important markets globally. “In recent years, influenced by many factors, Adidas’s sales in China have not been satisfactory. But I believe that the development of Adidas in the Chinese market is a marathon, not a 100-meter sprint. In the marathon, there are times when we take the lead, and there are times when we need to slow down, adjust and reserve our strength to prepare for another sprint.” Xiao added.
Xiao believes that, in the Chinese market, Adidas needs to use its own global innovation and design resources to gain insight into the needs of Chinese consumers and cooperate with more young Chinese designers and artists to create more products full of Chinese elements. “I hope that in the next few years, the product category with Chinese characteristics will account for one-third of the products sold by Adidas in the Chinese market,” said Xiao. But at present, the proportion is about ten percent.
The third quarter was full of troubles for Adidas. In October, Kanye West, the manager of Yeezy, became deeply involved in a racial discrimination controversy. Following Gap, Balenciaga and other brands, Adidas announced the termination of its cooperation with Kanye West on October 25. Despite this, Adidas does not want to give up on this copyright easily. After all, sales of the Yeezy product series reached $1.7 billion in the last fiscal year. According to the Wall Street Journal, Adidas is considering a continuation of Yeezy sales.